A firmer U.S. dollar put Latin American currencies and bonds under pressure on Friday, as investors waited for U.S. jobs data that could shift regional funding costs. The exposure is direct: a stronger dollar can increase the local-currency cost of servicing dollar debt, while a change in U.S. yields can alter the appeal and price of regional assets. Oil offered exporters a counterweight, but it also brought fuel costs and inflation concerns.
The external price signal
The U.S. nonfarm payrolls report, average hourly earnings and unemployment rate were scheduled for 09:30 Brasília time. Private payrolls were expected to slow sharply. The result could influence the dollar and regional funding costs, leaving Latin American markets dependent on a release from outside the region for their next major direction.
The overnight board showed the U.S. 10-year Treasury yield lower, Brent crude elevated and volatile, gold and silver higher, and the VIX little changed. U.S. equity futures were little changed, European shares were indicated higher and Asian markets were mixed. The U.S. ISM manufacturing index came in at 54.5, against a forecast of 55, while its prices-paid gauge rose to 77.9 from 71.1.
At the Oct. 1 close, the Ibovespa stood at 187,197, up 0.46%. The same board listed USD/BRL at 5.2176, up 0.84%; USD/MXN at 18.2965, up 1.26%; and USD/CLP at 986.18, up 1.40%. USD/COP fell 0.61%, while USD/ARS fell 0.01%.
A separate cross-market board dated Oct. 2 at 06:45 listed the Ibovespa at 187,197.46, up 0.46%; Mexico’s S&P/BMV IPC at 63,828.60, down 0.60%; Chile’s S&P IPSA at 10,908.18, down 0.56%; and Argentina’s S&P MERVAL at 2,758,840, unchanged. Colombia’s MSCI COLCAP fell 0.75%, and Peru’s BVL S&P fell 0.13%. The board listed USD/BRL at 5.16, USD/MXN at 17.06 and USD/CLP at 913.98.
Pressure across national markets
Brazil’s real started Friday under modest pressure after the dollar rose overnight. The report said the stronger dollar raised hedging costs and made Brazil’s Selic rate more sensitive to U.S. yields. It described the U.S. 10-year yield as historically high, while noting that its softer level could support emerging-market carry trades.
Brazil’s IPC-Fipe consumer-price gauge was due at 05:00 Brasília time, with a September forecast of 0.3%, compared with 0.01% in August. Industrial production data was due at 09:00 Brasília time. CFTC speculative-positioning data covering positions in the real, peso and gold was also due later.
The report said Mexico’s and Chile’s pesos had slipped more than Brazil’s real, while Colombia’s peso had firmed against the dollar. Argentina’s official peso was nearly flat; the report described the parallel rate as the market’s real pricing signal. The Ibovespa had risen for three consecutive sessions and stood about 6% below its 52-week high. Mexico’s IPC was about 11% below its 52-week high. Chile’s IPSA lacked a catalyst beyond copper and the dollar, while Argentina’s Merval was volatile, with large daily moves linked to peso dynamics.
Oil, output and the regional cost
Higher oil prices could support government revenue and companies including Petrobras and Ecopetrol, but they could also raise fuel costs and complicate inflation. Brazil, Colombia and Mexico export oil. The Colombian market, the report said, was caught between oil income and a firmer dollar. Gold and silver prices rose on the overnight board, supporting mining in Peru and Mexico.
Recent economic data showed Brazil’s S&P Global manufacturing PMI at 44.8 in September, down from 46.3 and its weakest reading since April 2023. Mexico’s manufacturing PMI rose to 50.3 from 49.8, but business confidence remained below 50 for its 19th consecutive month. Chile’s Imacec economic activity index fell 1.0% year on year in August, and copper mining fell 17.4%. Peru’s annual inflation in Lima reached 4.55% in September, above the central bank’s 1%-3% target range.
A decisive rise in the dollar index after the U.S. jobs report could weigh on regional equity boards, the report said; a retreat could support a relief rally led by energy stocks. The region’s immediate market direction still hinged on the dollar, U.S. yields and commodity prices.